Mergers & Acquisitions and Capital Markets Update
By Clint Bundy
Bundy Group has had the privilege of specializing in the automation and control system integration markets for more than 15 years.
Our experience includes not only representing numerous automation solutions and control system integrators in business sales and capital raises, but also participating in industry panels, providing educational content to top industry players, and actively engaging as a member of the Control System Integrators Association (CSIA) — a fantastic platform for learning and involvement!
It has been exciting to witness the ongoing growth and evolution of the automation and control system integration markets.
These segments have seen robust activity from a mergers-and-acquisitions (M&A) and capital-raising perspective.
As a result, business owners and executives in the CSIA community regularly receive a high volume of unsolicited calls and emails from buyers.
For the benefit of the CSIA community, I wanted to provide an update on these trends and outline how owners and executives can take advantage of the opportunities presented.
Why Are the Automation and Control System Integration Markets Attracting so Much Strategic and Financial Sponsor Buyer Interest?
Several factors have driven strong interest from both strategic buyers (operating companies) and financial sponsors (institutional investors, private equity, family offices) in the automation and control system integration markets.
Key reasons include:
- Resiliency and Growth: Over a multiyear period marked by challenges — such as the pandemic, rising inflation, interest rate hikes, and recessionary threats — the automation and control system integration markets have shown remarkable resilience and growth. The outlook for these segments remains positive.
According to Interact Analysis, a leading provider of market intelligence to the robotics and automation sectors, the global market for key automation products grew in revenue terms with a CAGR 4.5% for the period 2020 to 2023. Despite a challenging year in 2024, the outlook for automation growth will remain above 4% (on average) to 2028. - Value-Added Solutions Providers: Control system integrators are recognized for adding significant value, as evidenced by their repeat client relationships, strong margins, and promising growth profiles.
Strategic buyers and financial sponsors favor companies that offer value-added solutions over commodity services, placing a premium on these businesses. - Organizational Professionalization: Many owners are focusing on professionalizing their organizations by building strong management teams, investing in robust financial and data reporting systems, and developing attractive client end-markets.
These efforts not only increase company value, but also make them more appealing to strategic buyers and financial sponsors. - Flight-to-Quality in Uncertain Times: In a volatile macroeconomic environment, strategic buyers and financial sponsors often seek “safe havens” for capital.
The strong fundamentals of the automation and control system integration markets attract these groups and their substantial reserves of capital, leading to an imbalance between buyer/investor demand and the available supply of automation solutions firms for acquisition.
What Specifics Can You Provide About M&A Activity in the Automation and Control System Integration Markets?
The numbers illustrate the current state of the M&A market in these segments:
- Global Market Trends: According to Pitchbook, a leading information platform focused on M&A and capital markets, the global M&A market, which reached a record $4.7 trillion in closed deal value in 2021, decreased by approximately 35% in 2023, totaling $3.1 trillion in aggregate closed deal value.
Additionally, the number of closed global transactions declined from 45,010 in 2021 to 39,957 in 2023.
However…
- Consistent Automation Market Activity: Bundy Group has tracked a steady level of automation transactions from August 2021 through 2023. There were 189 announced automation transactions in 2023, which was a 128% increase from 2022 announced transactions. This market strength has carried into 2024, which has 105 announced transactions through October 16, and it shows no signs of slowing down in 2025.
- Strength in the Control System Integration Market: As a subsegment of the automation market, the control system integration market demonstrated growth in transaction volume from August 2021 through October 2024.
For instance, 2023 saw a total of 44 announced transactions in the control system integration segment, up from 30 in 2022. Notable closed deals include MR Systems’ sale to Inframark, E TECH Group’s sale to Graham Partners, Avanceon’s sale to Actemium, and Ultimation’s sale to Motion & Control Enterprises.
Based on Bundy Group’s own client backlog, we anticipate a continued healthy pace of closed system integration transactions over the coming year.
- Valuations Remain Strong: Although valuations across the broader M&A market have been impacted by rising interest rates and other macroeconomic challenges over the past 18 months, valuations for high-quality companies in the automation and control system integration markets have remained resilient.
While all buyers (both strategic and financial sponsors) seek buyer friendly deal terms, the foundation remains for control system integration owners to achieve strong valuations in a sale.
In today’s market, using competitive pressure is more crucial than ever to maximize seller outcomes. - Expanded Strategic Buyer and Financial Sponsor Options: Compared to 15 years ago, when Bundy Group began advising in the automation and control system integration sectors, business owners now have a significantly wider array of exit options.
Bundy Group’s extensive network includes hundreds of strategic buyers and, arguably, thousands of financial sponsors active in or targeting the automation and control system integration segments.
This broad array of buyers and financial sponsors highlights the strong demand within the automation and control system integration markets.
Transaction Case Study Example
Recently, a client in the control system integration market engaged Bundy Group to manage a competitive sales process.
This process attracted substantial interest from both strategic buyers and financial sponsors, resulting in 18 initial offers with a wide range of valuations and structures.
Following management presentations and the letter-of-intent phase (i.e., formal offers), a strategic buyer was selected. The transaction ultimately closed at a value 43% higher than the offer initially received from a buyer before Bundy Group’s involvement.
While there will always be potential headwinds in the economic and M&A markets, the future looks bright for control system integrators and the intrinsic value for their firms.
Summary Takeaways
- Continued Strong Demand: Demand from strategic buyers and financial sponsors continues to exceed the supply of quality acquisition targets. Despite recent challenges in the broader M&A market, the automation and control system integration sectors remain highly attractive and active segments.
- Resilient Valuation Multiples: Valuation multiples for high-quality automation and control system integration firms have remained strong, even amid challenging macroeconomic conditions. Owners should be cautious about unsolicited buyer inquiries, as non-competitive situations can weaken the seller’s negotiating position, leading to lower valuations and less favorable deal structures.
- Focus on Building Value: Whether planning to sell or raise capital in the future, or never, owners and management should prioritize building value within their companies. This involves creating stable, profitable, and growth-oriented organizations backed by detailed financials and analytics.
- Importance of a Competitive Process: When an owner is ready to pursue a sale or recapitalization, running a competitive process is essential. This approach helps maximize value, ensures no money is left on the table, and aids in finding the best possible fit for the business.
Clint Bundy is managing director of Bundy Group, a boutique investment bank that specializes in representing automation, systems integration, industrial technology, Internet of Things, and cybersecurity companies in business sales, capital raises, and acquisitions. Over the past 35 years, Bundy Group has advised and closed on over 250 transactions, which includes numerous automation-related transactions.
